Initially, Intel's (NASDAQ:INTC) third quarter earnings report, announced on Oct. 13, seemed to inspire investors. Immediately following the good news -- and much of it is, once Q3 results are fully digested -- Intel shares jumped nearly 2%. After further review, the Street seemed to do what it always does when it comes to analyzing Intel quarterly news: lament its declining PC-related sales and start selling.

For those in search of growth and income alternatives, the subsequent sell-off of Intel stock has made what was already a good opportunity even better. How can this be? After all, Intel reported flat revenue in Q3 compared to the year-ago period, earnings-per-share (EPS) declined 3%, and operating income was down even further, off 8% from 2014's Q3. It's what Intel did to temper its flat to slightly lower financial results that will pay off in the long-run, and in those regards Q3 was spot on.

Just the facts
The initial, positive reaction to Intel's third quarter was likely due to its exceeding vaunted analyst estimates for both revenue and EPS. As investment veterans know, besting the Street's estimates nearly always results in a quick share price pop, regardless of comparables.

Consensus estimates were for Intel to report Q3 revenue of $14.22 billion and earnings of $0.59 a share. Intel ended the third quarter with $14.5 billion in sales and EPS of $0.64.

Intel's Q3 may look a bit ho-hum given its lack of total revenue growth and earnings that were slightly off last year's $0.66 a share. Particularly worrisome for those who still consider Intel a PC-reliant chip maker was the 7% revenue decline within its Client Computing Group, home of all things desktop, tablet, and mobile. But growth and income investors should look at the "catastrophe" that was Q3 another way: despite PC revenue declining from last year's $9.2 billion to 2015's $8.5 billion, Intel still managed to post total sales essentially identical to last year's.

Not to mention Intel upped its ready cash and equivalents to nearly $21 billion (though its balance sheet also includes a boost in long-term debt), paid shareholders a 3% dividend yield, and spent $1 billion to buy back 36 million shares of stock last quarter. The manner in which Intel made up for the drop in its client computing group to report a sound third quarter is exactly why it should be on a short-list of investment alternatives.

How'd they do that?
As one analyst put it following Intel's earnings report, "Fundamentally, Intel is the cloud right now -- they are completely dominant with their family of chips. And that really is the opposite side of the weakness in PC." Exactly. The "cloud" the analyst refers to is reflected in Intel's Data Center Group, which grew by double-digits yet again last quarter.

At $4.1 billion, Intel's data center revenue improved 12% over last year, and even more importantly continues to make up a larger portion of total revenue. Now toss in a 10% jump in Internet of Things (IoT) revenue, to $581 million, and Intel CEO Brian Krzanich's transition to burgeoning markets, including cloud and IoT, is beginning to pay off handsomely.

Along those same cloud and IoT lines, Intel also said its partnership with Micron Technology (NASDAQ:MU) to build "the industry's first new memory category in more than two decades" has come to fruition. Intel and Micron Technology were in a race with several tech industry heavy hitters to get its 3D XPoint memory solution to market, given it's up to 1,000 times faster than old-school flash memory solutions.

With the advent of the cloud and IoT, faster computing, processing, and memory speeds are quickly becoming a necessity, rather than a nicety, and the new 3D XPoint is a significant step in the right direction.

At some point, investors will come to realize Intel isn't about PCs any longer -- Krzanich is making certain of that. Which is what makes the aforementioned analyst's statement regarding Intel being a cloud solutions provider so telling is that some insiders are finally seeing the light. Until the rest come on board, growth and income investors should consider buying Intel stock with each and every down-tick.

 

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.